Suppose your company has opened a futures position in the Brazilian Real futures contract traded on...

Suppose your company has opened a futures position in the Brazilian Real futures contract traded on the CME Group. One contract is worth 100,000 Brazilian Reais, and the price quote is given as # USD per 1 Brazilian Real. Suppose today’s futures price for the Brazilian Real futures contract that expires in October is ‘0.1883’. If the daily changes in the settlement prices over the next 5 days turn out to be 0.0015, 0.0010, -0.0005, 0.0020, and -0.0025 (quoted on same basis as the price--#US$ per 1 Brazilian Real), what would be the total marking-to-market change in the value of the contract over the 5 days? If your company was long Brazilian Real, would it have gained or lost from this marking-to-market change in value (assume 1 contract)?

Solutions

Expert Solution

Present day value = 1BR =.1883
Present Contract worth 100,000 * .1883 = 18830 USD

daily price changes

Day	Rate Of price Change		Investment Value Daily
1	.0015	1.0015*.1883 =.18858245	100000*.18858245
2	.0010	1.0010* .18858245 =.188771	100000*.188771
3	-.0005	.9995*.188771 =.1886766	100000*.1886766
4	.0020	1.0020*.1886766=.189054	100000*.189054
5	-.0025	.9975*.189054 = .18858	100000* .18858

Investment Value

Present 1,00,000 *.1883 = 18,830 USD

Day 5 1,00,000*.18858 = 18,858 USD

The Contract will br in profit of 28USD at the end of day five

jeff jeffy answered 2 years ago

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